I lived in Stowe, VT in the early 1970s and ran a day care center for skiers’ kids. When I needed a loan I saw the local banker. Can’t remember the name of the bank but sure do remember the banker, Kermit Spaulding.

I remember Mr. Spaulding because he was a real guy in a bank at a time when someone wanting a loan went to their local bank, sat down with the banker and talked about their needs. Banking was simply banking back then. Bankers knew the people they were loaning money to no matter if it was a personal loan, one for a mortgage, car or a business need. They didn’t invest your money into hedge funds. That was left to others within the financial industry.

One doesn’t have to have an MBA to know that banks today are far riskier institutions today with the money you give then than they were decades ago; that cross-selling is what their tellers/reps are trained and required to do; that real personal relationships between a banker and his/her customers are hard to come by; and that the mortgage you got was more than likely sold to another source quite likely before the ink dried on the 3000-page contract you had to sign.

Oh, and did I mention that FDIC insurance doesn’t cover all the money in your accounts today?

In 2009, the FDIC figured over 700 banks were in danger of failing, 140 actually did. Roughly 30 percent of all banks lost money last year at an estimated cost to the FDIC insurance fund of $37.4 billion. That left the FDIC’s “insurance fund with a negative balance of $20.9 billion.” That figure, however, does not include monies in a separate reserve or monies collected from a special assessment. All this according to a story Wednesday in The Washington Post (Source: , http://www.washingtonpost.com/wp-dyn/content/article/2010/02/23/AR2010022302120.html .(http://tinyurl.com/yfj7rhn)

But wait. There’s more.

According to an email newsletter from My Budget 360, (everything in it is written with excitement so be warned) the FDIC is protecting the Deposit Insurance Fund. Additionally, Citibank is apparently sending customers a notice stating that they reserve the right to “require (7) days advance notice before permitting a withdrawal from all checking accounts”. (Source: http://www.mybudget.360.com 2/24/10). That doesn’t sound good to me.

So I’m a Paul Volker fan, he’s the former Federal Reserve Chairman, for two reasons. First, he’s tall. I like that. I am. Second, the Volker Rule, named after him, would take the banking industry to a place requiring banks to have some fiduciary responsibility. It would also prohibit commercial banks from things like owning hedge funds and limit the trading in the bank’s accounts.

I don’t know too many people who really understand that the money they put money into their bank checking, saving or whatever accounts could be invested in say hedge funds or traded in the marketplace in any number of ways. Or would like that. And assuming they do, based upon the kind of returns/yields banks are giving their customers on their savings, checking or CDs must be pretty lousy at getting decent investment returns.